Instability of Employment and the Lack of Work Life Balance: From the viewpoint of compensating wage differentials

Author Name MORIKAWA Masayuki  (Vice President, RIETI)
Creation Date/NO. July 2010 10-J-042
Research Project Empirical Analysis of Japan's Labor Market: Policy Responses to Fertility Decline and Population Aging
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The purpose of this paper is to present survey-based evidence on the compensating wage differentials for the instability of employment and the lack of work-life-balance in Japan. First, we present facts on the individual evaluation of the size of fair compensating differentials. Then we estimate the effects of working hours and wages on the job satisfaction index. The fair compensating wage differentials for the instability of employment and lack of work-life-balance are both between 10% and 20%. The actual relative wages of nonstandard workers may be too low. On the other hand, if “short-hour regular jobs” are characterized by strong employment protection and work-life-balance, a relative wage discount of 10% to 20% coincides with the average workers' perception of fairness, which will contribute to the adoption and diffusion of work-life-balance jobs. Working hours have a negative effect on job satisfaction and wage levels have a positive effect, but the magnitude of the effects is different between male and female workers. Male workers have a strong preference for wages. Overall, in order to achieve diversity of work, flexibility of working hours should be accompanied by wage setting flexibility.